On a pro-people economic system based upon employee owned free enterprise (as opposed to an economic system based upon greed driven wealthy capitalist owned free enterprise).

Part 1: Principles of employee owned companies to be set up and enforced by the federal government:

1) All companies larger than 50 employees and "sufficiently" past the original founder(s) (see note #6 of part 1) would be employee owned. Each employee would "own" an equal "share" of the company.

New employees too poor to buy a "share" of the company would be lent the money by the company. This loan would be repaid by deductions taken out of the new employee's pay checks. Upon leaving a company employees would be paid back their "share" at its current value.

2) Employee compensation would be in pay, profit sharing, and an equal share of the worth of the company. The worth of a company would be its land, equipment, buildings, cash reserves, copyrights, patents, and money owed to it minus the money the company owes.

All employees would share equally in profits, i.e. each employee would receive the same amount. Profits would be distributed between R+D, debt payment, expansion, new equipment, taxes, and employee profit sharing.

3) In order to buy a company from its original founder(s) when that individual(s) wished to sell the company funds would be borrowed from private and/or government sources by the employees.

4) Cash for company expansion might be raised by issuing public "stocks" but these would be some sort of loans similar to student loans (prior to 1997)(i.e. possible to apply for interest free extensions).

The current stock market would be converted to such floating loans.

5) Industries employing large numbers of minors would be exempted all or in part (i.e. this idea is for GM, GE, etc., not fast foods).

6) As a part owner of a company an employee couldn't be fired arbitrarily. They would have to be voted out by their peers or some such democratic method (unless a crime had been committed). See note #2 of part 1.

Suspensions of employees by supervisors would be reviewed within one week by the suspended employee's peers with the suspended employee present.

7) Suggestions from suggestion boxes would result in cash rewards (10% of their worth) for ideas leading to cost cutting measures, etc. Peer review of suggestions would be part of the review process.

This is intended for "rank and file employees". Some sort of reward system for innovations above and beyond the norm by management personnel, whose job sometimes is to make innovations, must yet be worked out.

8) 5-10% royalties would be paid to employee inventors on their patents.

9) A 10/1 (less would be allowed) pay ratio between highest and lowest paid employee (except for sales people - they could be paid more) including perks but not including patent royalties, suggestion rewards, profit sharing, etc.


1- Boards of directors are out since the companies would be employee owned. How would management personnel be chosen? I have some ideas but I believe that with the ground rules given here that suitable democratic mechanisms would be used sooner or later to run companies. Evaluations of bosses by subordinates would certainly be implemented.

2- Firing of employees would be done by some sort of democratic vote cast by other company employees. Usually some one unsuitable for a position would simply go to another one. Theft or total laziness would be the primary reasons to get rid of someone.

My observation is that if there are about 10 or more peers (those doing the same work) it is enough that a 2 out of 3 vote would be accurate enough to fire somebody. For positions in which there aren't enough peers a company committee would review the situation and decide.

If a department of a company filled with lazy/problem people then the rest of the company could vote to fire them or break them up.

3- Pay for piecework has many advantages over an hourly rate (I know of a company where workers make $40k/year under this system). Since capitalist ownership usually takes advantage of workers under this system this method of determining pay has fallen into disfavor. Employee ownership removes the abuses.

4- Probably some sort of probationary period would exist before a new employee was permanently hired and became part owner.

5- Someone said she wouldn't want to share profits with her lazy coworkers. To this I say that over time people would seek out companies/industries in which they were compatible.

Employee ownership isn't for everyone. It's probably more suited to people possessing some combination of average or above average motivation, ability, and/or intelligence, yet not excessively greedy.

If people were treated right and made good money in employee owned corporations this would set a standard for government employees, small businesses, and founder owned companies.

6- A direct transition from original owner(s) to employee ownership may not always be for the best. This is because the rewards to individuals for starting companies should be reasonably preserved. There may be a number of scenarios of transition from original owner(s) to employee owned companies that should be examined with the above in mind. These transitions should be arranged in a way which preserves and rewards the pluses of individual entrepreneurs to society and the economy yet leads to eventual employee ownership if the business continues.

One such scenario is this: a person starts a company with $1 million. He/she hires 100 employees. Two years later he/she wants to sell the company and retire. Lets say the company has about $1 million in assets (buildings, equipment,etc.). The company made $1 million in profits, most of which the owner is keeping for him/her-self. Fine and good. Under the employee ownership plan presented in part one the employees, should they wish to, would be able to get a government/private loan to buy the company for $1 million. Yet suppose a third party offers the owner $2 million. Then in this case the owner would be able to sell the company to the third party for $2 million. No restraints would be put on the new owners other than those listed in part two for all U.S. employees. Later, if the new owners wanted to sell the company to a new party and could get substantially more than they paid for it or the assets of the company are worth then the new owners could sell to the new party for this amount rather than the employees. This procedure would continue as long as new owners could be found to bid substantially more (perhaps some fixed percentage) than the actual assets of the company. Eventually free market forces, patent expiration, etc., should bring down the profits of the company so that the employees could buy it.

The above scenario rewards the founder(s) of the company with the worth of the company as determined by the free market.

Should the government match the best offer for the company? No because it would be too hard to discourage dishonest bids in order to soak the government.

Workers who want to own a company after the founder wants to sell it should be required to make a serious personal investment in buying the company, up to say the value of a house, if the federal government would be required to lend the employees the money to purchase the company.  Otherwise, it would be too easy for employees to want to buy the company as long as the federal government was assuming all the risks in buying the company.

Part 2: Constructing the playing field.

The federal government should do it's job to construct and level the economic playing field. The playing field should be constructed so that it is pro-people rather than pro-money.

The following should be implemented for all employees, regardless of where they work:

1) Elimination of most mandatory overtime, including that for salaried workers. Overtime would be paid to salaried workers past 40 hours. The work hours might be averaged over a month or two for salaried workers.

2) A minimum of 4 weeks paid vacation for everybody that works (including foreign labor (as in Sweden)).

3) Use of part-time or temp agency employees in order to avoid hiring full-time employees would be illegal or discouraged. This might easily be implemented by requiring that temp employees be paid at least $10/hr or no less than the pay and benefits of a company's lowest paid permanent employee, whichever is greater, and that part-time employees of a company receive pay at a rate that is at least as much as the rate received by full-time employees doing similar work and benefits that are, at the least, in direct proportion to those of full time employees.

4) An OHSA 800 number for safety hazards. Talk of work place safety teams sounds promising.

5) Currently, federal anti-trust regulation has become a joke. Employee ownership would, I suspect, help here. If not, then anti-trust regulation should be strengthened.

It follows that at employee owned companies a vote would be taken among employees on whether they wanted to be part of another company (since each employee owns an equal share of the company).

There probably are situations where companies need to grow by merging.

6) Make it illegal for local or state governments to use tax break incentives for businesses to locate in their areas (except for enterprise zones).

7) Regarding labor laws: get rid of job classification and allow management to perform blue collar work. These rules are counterproductive and divisive.

Unions would probably cease to exist at employee owned companies for lack of need.

8) Implement tax reform. Taxes should be fair and as simple as is reasonably possible. An example - Jerry Brown's flat tax in place of the current system. The main parts are a 13% personal income tax (including social security) and a value added tax (13% x (sales - purchases)) on businesses in place of the current tax system. Throw out the rest of the personal income tax book. I think a progressive tax rate (i.e. tax tables) should be kept in lieu of a flat 13% for personal income taxes.

Taxes on businesses help capture income taxes which aren't collected because of unreported personal incomes so there should continue to be some sort of corporate tax and/or perhaps a national sales tax.

I suspect a sales tax or value added tax on corporations rather than an income tax on their profits would work better.

9) The national unemployment rate should be accurately measured (it currently isn't).

10) Full employment could be achieved by linking the unemployment rate to some combination of lowering the number of hours worked (currently 40) at which overtime pay kicks in and raising the amount paid for overtime (currently time and a half).

Thus as automation/computers/robots reduces work performed by humans the benefits are shared by all. The pain of recessions would also be shared more evenly.

Perhaps as automation, computers, and robots decreases the number of work hours necessary for the average worker the decrease in wages caused by decreasing work hours for employees would/should be offset by the wage inflation this economic system would cause by keeping unemployment low.

Unemployment compensation should be a much smaller problem for employers since unemployment as we know it should cease to exit if all the proposals in this paper are implemented.

Competition from prison labor would be less of a threat to workers.

11) Importation of manufactured goods or raw materials from other countries which don't implement Part 2- #1,2,3,10 should be ceased.

Importation of manufactured goods or raw materials from other countries which don't observe our environmental standards should be ceased.

One might ban trading with undemocratic nations but if Part 2- #1,2,3,10 were observed the nations involved would probably be democratic.

12) So that American workers not be pitted against workers in democratic countries meeting Part 2- #1,2,3,10 and yet having substantially lower costs of living, companies in democratic countries that we trade with should meet, in the least, a realistic minimum wage standard for the U.S. (say currently $10/hr) or implement tariffs (sufficient to make up for the wage difference) on goods/services from such countries.

13) If the ideas in this paper were implemented perhaps the only minimum wage we would need in this country is a minimum wage designed so that minors and idiots not be taken advantage of.

14) 10 or 12 hour work days for 4 or 3 days per weeks should be outlawed unless the employee's vote for them.

15) The problem of too high or varying (from state to state or nation to nation) benefits should be addressed. Health care reform in the U.S. should take into consideration what companies in other countries have to pay for their employee's health care.

Under employee ownership, work related injuries should diminish greatly.

16) Welfare reform should include linking time on welfare to the unemployment rate.

Part 3: Change the investment market.

Making money with money is in some cases immoral (such as the current stock market). Possibly, some investors wouldn't like to invest in employee owned companies under the changes proposed. Immoral investments should be eliminated as possible:

1) Eliminate tax free government bonds.

2) Make it illegal for any American to invest in a company in a country which doesn't have democracy and human rights.

3) Land speculation as an investment is sad in that it often involves acquiring land and then waiting for overpopulation to raise its value.

4) Bring back Glass Steagall.

5) Require mortgage lenders to keep the mortgage (and not be able to sell it).

6)  Break up the banks to where they were in the 1980s.

7)  Make financial betting such as derivatives illegal.

8)  Restore Fannie Mae and Freddie Mac to how they operated before they became partly privatized.

general notes:

1) Many of the numbers, such as the 10/1 pay ratio between highest and lowest employee aren't hard and fast at this point (in this case the ratio could be lower).

2) The number of advantages to this economic scheme seem to me to be too numerous and obvious to mention. Should they be listed?

One less obvious advantage is the effect of employee ownership on the press and media. Hopefully journalistic standards would improve under this system.

3) The U.S. government needs to return to growing the money supply (e.g. gold standard, Bretton Woods, ...) as the wealth of the nation increases. The current system of built-in inflation means that the fundamental principle of working and saving for ones retirement has largely been destroyed since inflation reduces the value of savings. People are thus compelled to invest but investment without risk is largely predatory/parasitical. Investment with risk (e.g. in an invention of questionable value or R&D) is something those who have excess income to dispose of should participate in, not those saving for their golden years.

4)  Corporations should be chartered in the state in which they are headquartered.   Probably, even for employee owned companies, it should be mandated in the charter something about ethical behavior, concern for community and concern for the long term good of our country.

5)   Possibly rather than have defined benefit pension systems where the employer has to pay pensions for currently retired employees, employers should be required to contribute to a pension fund for each hour worked by each employee.   The organization that administers the pension fund would pay current retirees - thus freeing employers of the need to be shackled with large pension obligations for previous employees  - regardless of the company's current market success.   Note that for employee owned companies the employees would be paying into their own pensions.

6) This economic system will never be implemented in the U.S. unless elections are publicly funded (with no opt-outs) and other changes in the way the federal government is run are made (such as getting rid of the seniority system in the U.S. Congress).

 comments may be sent to emp-own@inbox.com







Left Business Observer

The Washington Spectator

In These Times

Z magazine

International Socialist Review

Fairness and Accuracy in Reporting

Center for Economic and Policy Research

Citizens for Tax Justice






Federation of American Scientists       http://fas.org